Stocks tumble as commodities enter bear market

Global economic jitters sent stock prices sharply lower on Thursday after Moody's Investors Service downgraded the rating on 15 financial firms with international operations.

The Dow Jones Industrial Average fell 250.82 points to 12,573.57. The Nasdaq Composite Index dropped 71.36 points to 2,859.09, and the S&P 500 stock index was down 30.18 points to 1,325.51.

For the day, the Nasdaq fell 2.44 percent, the S&P 500 fell 2.23 percent, and the Dow was down 1.96 percent.

The market slide confirmed the disappointing comments from the Federal Reserve and Chairman Ben Bernanke on Wednesday suggesting a slowdown in domestic growth as well as lingering weakness in the housing market and employment.

Commodities followed stocks lower. Oil tumbled $3.25 to $78.20 a barrel, a drop of 4 percent. Gold fell $50.30, a loss of 3.1 percent, to $1,565.50 an ounce.

“The economy is losing momentum," said James McDonald, chief investment strategist at Northern Trust Corp. (Nasdaq: NTRS) in Chicago. "The question will be how much the U.S. and China slow. On top of that, the Fed’s response [Wednesday] was fairly tepid. While they indicated willingness to do more, they haven’t done it.”

Stocks from Hong Kong to London and Sao Paulo slumped on concern about a global slowdown. Data showed euro-area manufacturing shrank at the fastest pace in three years, and a Chinese output gauge indicated contraction. More Americans than forecast filed claims for jobless benefits, manufacturing in the Philadelphia region shrank, and sales of existing homes fell.

The reports came out a day after the Federal Reserve lowered its growth and employment estimates while signaling it may add to its record stimulus. The central bank Wednesday extended its so-called Operation Twist program to replace short-term bonds with longer-term debt, disappointing some investors who expected more asset purchases. Former Fed Chairman Alan Greenspan on Wednesday said the U.S. economy “looks very sluggish.”

Measures of commodity producers in the S&P 500 lost at least 3.2 percent for the biggest declines since November. The S&P GSCI Spot Index of 24 raw materials fell 2.8 percent to settle at 559. It has dropped 22 percent from this year’s highest close of 715.52 on Feb. 24, entering a bear market.

Alcoa (NYSE: AA), the largest U.S. aluminum producer, dropped 4.2 percent to $8.55. Chevron (NYSE: CVX) decreased 3.5 percent to $100.02.

The KBW Bank Index tumbled 2.3 percent as all of its 24 stocks retreated. Bank of America Corp. (NYSE: BAC) dropped 3.9 percent to $7.82. JPMorgan Chase & Co. (NYSE: JPM) slid 2.6 percent to $35.51.

Bed Bath & Beyond (Nasdaq: BBBY) declined 17 percent, the most ever, to $61.17. It said comparable-store sales in the first quarter rose 3 percent compared with 7 percent a year earlier. Analysts projected a gain of 3.8 percent, the average of five estimates compiled by Bloomberg.

Red Hat (NYSE: RHT) dropped 6.2 percent to $53. Billings, a predictor of revenue, were $310 million in the quarter ended May 31, falling short of the $319 million average analyst estimate, said Abhey Lamba, an analyst at Mizuho Securities USA Inc.

ConAgra (NYSE: CAG) jumped 2.7 percent to $25.26. The company forecast fiscal year 2013 earnings of at least $1.95 a share. On average, the analysts surveyed by Bloomberg estimated profit of $1.92.

Gannett Co. (NYSE: GCI) added 3.2 percent, the most in the S&P 500, to $13.47. The publisher of USA Today reaffirmed its long-term annual revenue growth targets. The owner of 82 daily newspapers and 23 television stations also said at an analysts’ conference that it sees improved ad trends across all of its groups.

Facebook Inc.’s (Nasdaq: FB) 22 percent rally in two weeks has helped the company avoid posting the biggest slump among the largest U.S. initial public offerings since the start of 2011. The shares rose 0.8 percent to $31.84 Thursday.